The need to expand Nigeria’s fragile export base as once again been brought to the fore with the recent $1.4bn decline in the nation’s external reserves in just a month.
External reserves declined from $36.3 billion as of January 29, 2021, to $34.998 billion as of March 1,
NATIONAL ECONOMY learnt that the sharp drop occurred despite the increase of brent crude to over $66 per barrel as of February 24, 2021, from about $51 per barrel that it closed with on January 4, 2021.
A lecturer of economics at the University of Nigeria, UNN, Dubem Enaruna, yesterday told NATIONAL ECONOMY that it is imperative for the country to embark on the expansion of her export base while driving the vehicle of her non-oil sectors such as tourism and hospitality, among others.
He opined that Nigeria need to drive her non-oil economic diversification agenda as a way to earn foreign exchange to maintain reserve liquidity. He said, ‘‘We must delineate remedial measure for falling external reserves into the short term measure and long term measure. Fundamentally, for the short term measure, the CBN must begin the transition to a market determined foreign exchange rate that would revive the already weakened FDI and FPI inflow and eventually stimulate economic growth. For the long term, the government must radically drive the gospel of economic diversification through prioritisation of the non-oil sector.’’
Also commenting on the decline, the president of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, said that the decline in Nigeria’s external reserve despite the recent increase in oil prices was due to supply shocks and shortages of foreign exchange due to drop of forex inflow from various sources.
‘‘Completely, all the sources coming have dried up, the oil prices dried up, IMTO window dried up. We are talking about a month, and these are contracts that have been closed for 3, 6 months’ delivery. We are just witnessing it. You know we have a lot of supply shocks and shortages even before the appreciation of the crude oil prices, we just came out of recession with less than even 0.1%. We know the prices of crude oil, the demand came down throughout the Covid-19 period, even now with the new variant. So the IMTOs inflow has reduced drastically, export proceeds have reduced drastically, the I & E window has also gone down drastically.’’
Also, a financial analyst, Femi Okediran, hopes that by the next quarter, Nigeria could see an accretion in her external reserves as the apex bank presently has some obligations that are reducing the external reserves.
He said, ‘‘There is a Eurobond maturity that CBN funded for, so that would also reduce the reserves, then another thing is that the CBN has been intervening in the forex market. So on that space, you are seeing retail, you are seeing SME and invisibles intervention weekly. Retail is biweekly and SME and invisible about $100 million weekly. So sometimes CBN has bilateral transactions with international institutions and local banks where they take their FX and basically give them treasury bills, so that also is part of the reserves.
The CBN governor, Godwin Emefiele, had recently said Nigeria’s external reserves at $35bn was sufficient to finance the country’s seven months’ imports.
During the CBN/Bankers’ Committee conference on Friday, Emefiele said efforts were being made to conserve the country’s foreign exchange. He said, “With the decline in our foreign exchange earnings and subsequent adjustments in the value of the naira vis-à-vis the US dollar, the CBN has continued to implement a demand management framework, which is designed to support improved production of items that can be produced in Nigeria, and further conservation of our external reserves.’’